Introduction Tinnitus is hypothesized to be an auditory phantom phenomenon resulting from spontaneous neuronal activity somewhere along the auditory pathway. We performed fMRI of the entire auditory pathway, including the inferior colliculus (IC), the medial geniculate body (MGB) and the auditory cortex (AC), in 42 patients with tinnitus and 10 healthy volunteers to assess lateralization of fMRI activation. Methods Subjects were scanned on a 3T MRI scanner. A T2*-weighted EPI silent gap sequence was used during the stimulation paradigm, which consisted of a blocked design of 12 epochs in which music presented binaurally through headphones, which was switched on and off for periods of 50 s. Using SPM2 software, single subject and group statistical parametric maps were calculated. Lateralization of activation was assessed qualitatively and quantitatively. Results Tinnitus was lateralized in 35 patients (83%, 13 right-sided and 22 left-sided). Significant signal change (P-corrected < 0.05) was found bilaterally in the primary and secondary AC, the IC and the MGB. Signal change was symmetrical in patients with bilateral tinnitus. In patients with lateralized tinnitus, fMRI activation was lateralized towards the side of perceived tinnitus in the primary AC and IC in patients with right-sided tinnitus, and in the MGB in patients with left-sided tinnitus. In healthy volunteers, activation in the primary AC was left-lateralized. Conclusion Our paradigm adequately visualized the auditory pathways in tinnitus patients. In lateralized tinnitus fMRI activation was also lateralized, supporting the hypothesis that tinnitus is an auditory phantom phenomenon.